Erik Hansen is a graduate student pursuing a Master of Public Policy and the “When I Was a Mustang…” columnist.
For those of you who got your license when you turned 16, one of three things probably happened: your parents bought you a car, you got a hand-me-down or, for the hardworking, you saved up your paper route/lawn mowing/window washing money and bought one.
Now, at 22 and about to graduate, that car is on its last legs. As it rumbles and tumbles into the parking structure every day, you think to yourself, “I can’t wait to graduate, get a job and buy a new car.”
As you do graduate and get a job, even if work takes you to a place with semi-functional public transportation (e.g. San Francisco, Boston, Washington, D.C.), a car can provide you with the freedom to escape the city during the weekend, or rush in to work when you wake up late.
While there are advantages to buying a new car, there are also many to buying a used car, especially if you can buy it straight up. Here are just a few of those advantages to consider when you finally trade-in or junk your current set of wheels.
Avoid the years of highest depreciation: Cars are not an investment, unless you are buying and fixing up antique cars. That 0 percent financing you can get today on a new car will soon be negated. When a new car leaves the dealership, it instantly depreciates in value. How much it depreciates depends on the make and model, but it will almost certainly mean the loss of thousands of dollars … in seconds. You’ll end up upside down on your new car for years to come.
Why not let someone else saddle that load and pick it up after two or three years? If the average driver travels roughly 12,000 to 15,000 miles a year, buying a two to three-year-old car with 25,000 to 40,000 miles on it still gives you another 100,000 miles before any major overhauls should (hopefully) be needed.
Lower insurance costs: Unless you decide to buy a used sports car or 4×4, insurance costs for a used car are significantly lower than insurance costs for a new car. Of course, this is in part due to the fact that your used car will most likely be worth less than a new car.
Maybe you think about insurance now because you already pay it or maybe your parents have been picking it up, but, depending on your driving record, your monthly insurance premium is another bill you’re going to have to worry about into the future.
Lower cumulative monthly payments: After you have graduated and secured the job you’ve always wanted, every other week your paycheck is going to disappear, quick — before you can get your hands on the remnants.
Student loan payments, 401(k) contributions, flexible spending account and 125 deferments, your 529 plan (for graduate school) and car insurance are all going to whittle away at your once hefty paycheck. Not to mention rent, utilities, cell phone bill, savings — you get the point. Do you really want to add another $500 a month for the next five years for a new truck that’s not even fully loaded?
There is less worry about dings and dents with a used car than with a new car. That pristine coat of paint on a new car calls out to shopping carts and baby strollers.
While no car goes through life without its share of war wounds, adopting a car that has already seen a few door dings and errant baseballs can provide a certain sense of ease and freedom. Especially if you are going to have to park in a parking garage for work, which can be just as bad as any one of the parking lots here at Cal Poly.
Then there is garage storage. Do you know where you’re going to be living next year? Or even two or three years from now? Will you always have a garage to store your car in?
Similar to reducing your worry about dings and dents, you’ll probably feel much more at ease parking your used car outside (if need be), than parking your new car outside. Until you have saved up enough for a down-payment on a new home, with a four-car garage and are all settled down, you’ll probably feel much more comfortable parking your used car in the rain or snow every night than you would with a shiny new car.
While a strong argument can be made for buying a new car, these are just a few advantages to consider when buying a used. Of course the No.1 risk of buying a used car, especially from an independent party, is the quality of the used car.
While such reports, like those provided by Carfax, and a test drive can help, buying from a dealership is always the safest bet. Especially since most used cars that come from dealerships are certified used cars. They have passed some form of inspection and could even be covered under a manufacturer warranty.
That said, you’ll most likely pay more when buying from a dealership than from an independent party. You can weigh the risks.